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Toyota Recalls Could Have Lingering Effect On Consumers

Wednesday, January 26, 2011 - 04:20 PM

(Detroit - Noah Ovshinsky, WDET) Toyota released its 2010 sales numbers this week. The company continues to be the top seller in the US market with almost 1.8 million units sold last year. But a closer look at the numbers reveals that sales are trending downward. Experts say recent recalls involving unintended acceleration are mostly to blame. And today's news of further recalls will likely haunt the company well into the future. (Listen to the audio here, or read the story below.) Meanwhile, Toyota continues to struggle to attract younger drivers.

Toyota's concept vehicle, the FT-CH hybrid, which they unveiled at the 2011 Detroit Auto Show

The reason, at least partly, lies in what the drivers I interviewed had in common. Most are either middle-aged or have prior experience with Toyotas. Experts say these are the buyers that will return to Toyota. For the younger generation–it may be a harder sell.

Let’s be clear. Toyota is still a very popular brand in this country. The Camry remains the number one passenger car in the US. For most of the last two years, however, the company found itself in an unfamiliar place.

For months Toyota was on the defensive as the company dealt with high profile recalls that had people questioning its commitment to quality. The change in perception hasn’t gone unnoticed by the company’s top brass. President Akio Toyoda alluded to what he called a “difficult year” in remarks he made during this month’s North American International Auto Show. It was his first time speaking before an American audience since an appearance on Larry King a year ago. At the auto show, Toyoda touted his company’s success despite the recalls. “We intend to continue to earn that customer loyalty," he said, "with even greater dedication quality, safety, and customer care.”

He also looked to the future.

Toyoda, as one might expect, has plenty of faith in his company-- but how about the American consumer? Last year, Toyota sales in the US fell about a half a percent in a market that was up more than 10 percent over the previous year. George Magliano at IHS Global Insight says this drop is a big deal. "Say you go back to 1999," he explains. "Toyota started at about 9 % US market share of US light vehicle sales and it's an almost unbroken track record up until last year and they crested at over 17% market share in 2009. Last year the market share fell to 15 %.”

To get a sense of what consumers are thinking about Toyota these days, I talked to some real consumers. I spent part of an afternoon staking out the Toyota display at the Auto Show.

Don Benoit says the recalls haven’t changed the way he looks at the automaker. He’s never owned a Toyota. But he says he knows people who do. “I think there is overall a tremendous trust," Benoit said. "I especially talk to people who own them and I don’t myself but when I hear people who have owned them, they don’t seem to be too bothered by the things that happened last year.”

Jeff Sloan of Ann Arbor says the recalls wouldn’t prevent him from considering a Toyota if he were in the market for a new car. “I’m sure there are buyers out there that it would affect their purchasing intention," he says, "but for me it’s more about how the company handles it. Did we get back, can we rectify whatever the problem was. For me, I don’t think it would have any personal bearing on whether I would buy one or not.”

Ontario resident Ali Shahabi was also making the rounds at the Auto Show. He has a long history with Toyota and says the recalls wouldn’t prevent him from buying another. In fact--Shahabi bought two this month. “We’ve been very happy with Toyotas," he says. "We (owned) Sienna’s for many many years. That doesn’t mean that Chryslers or Ford are bad, they are very very good, but once you have a vehicle for ten years and never have any issues, the tendency to get the same are much higher.”

Everybody I talked to seemed to love Toyota despite the recalls. Based on this admittedly small sample, Toyota should have nothing to worry about this year, right? Not exactly. Experts say the company is unlikely to gain back the market share it lost in 2010. The reason, at least partly, lies in what the drivers I interviewed had in common. Most are either middle-aged or have prior experience with Toyotas. Experts say these are the buyers that will return to Toyota. For the younger generation--it may be a harder sell.

“The younger buyers have no loyalty to anyone right now," says IHS's George Magliano. "They would rather buy a used luxury car if they could than a new small car and I think you gotta really go and prove to them that you’re really got all the bases covered.”

Magliano says right now buyers in their late 20’s and early 30’s aren’t making it into showrooms in large numbers because of the economy. Simply put: many don’t have jobs. But when they do re-enter the workforce, these consumers are going to be looking for new wheels. Magliano says with this brutally competitive demographic, Toyota can’t afford recall controversies.

“I think this is gonna be paramount in their mind," Magliano said. "This is what is going to hurt Toyota. This is one of the issues that is going to keep them around that 15 percent. And I don’t think there is any easy way to wipe this out of the younger person’s memory. It is gonna take a long long time.”

Magliano says you need only look at the “Detroit Three’s” reputation for poor quality. He says it took them 10 to 20 years to change that perception.

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